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Walmart (WMT) Tests Direct-to-Fridge Online Grocery Delivery

Online grocery shopping and delivery is a booming industry in the United States and Wal-Mart Stores Inc. (WMT - Free Report) has been aggressively adopting a number of initiatives of late to gain traction in the market. Per media sources, the retailer is testing a delivery service in partnership with San Francisco-based smart-lock maker August Home and Menlo Park-based same-day delivery startup Deliv, wherein customers can get groceries delivered to their fridge directly.

The testing started this week, where a group of August Home customers voluntarily tested this grocery delivery service. Customers can order grocery on Walmart.com and get them delivered directly to their fridge. Deliv. August Home’s system informs customers when the delivery person reaches the gate and after entering the one-time code on the screen lock, they put the grocery into the fridge. Customers can watch monitor the entire activity through their home surveillance cameras.

We believe this is a innovative step in the online grocery delivery segment. While the move is restricted to August Home customers and shoppers who are willing to allow delivery people enter their home, it is definitely another significant move in offering multiple choices to online grocery shoppers amid increasing competition from Amazon.com Inc. (AMZN - Free Report) .

Walmart is trying every means to develop an impressive digital brand portfolio and has been aggressively adopting a number of initiatives in this regard to compete with e-commerce biggie Amazon. Last week, Walmart announced a program wherein it will allow food stamp receivers to order food and groceries online. However, they will have to pick up the items from any of the five specific stores in the United States. The giant retailer also enables customers to order groceries online and collect them from 900 locations. Also, with Easy Reorder on walmart.com, customers can repurchase items by looking into their previous in-store and online purchases records. The company also has a dedicated back-to-school destination on walmart.com which enables customers to shop school supply lists for more than 1 million classrooms across the country.

In order to expand in the online grocery and delivery market, the retailer has partnered with the ride hailing service provider Uber and Lyft for speedy online grocery deliveries. Walmart now operates online grocery delivery service in six markets. Walmart’s own mobile payment system called Walmart Pay has also enabled shoppers to pay through its existing smartphone app in all of its 4,500-plus U.S. stores. This system, launched in July 2016, marked another step toward accelerating the company’s online business and making shopping easier and faster.

The company’s free two-day shipping service to U.S. shoppers on a minimum order of $35 and that too without a membership fee has also proved to be a success. This service replaced Walmart's existing two-day shipping program named 'Shipping Pass' that charged shoppers an annual membership fee of $49 and competed strongly with Amazon’s Prime shipping program, which charges customers $99 a year for two-day shipping with additional features like a streaming video service. In August, the giant retailer teamed up with Alphabet Inc's (GOOGL - Free Report) Google to enter the budding voice-shopping market, following the footsteps of Amazon.

Per media sources, Google will offer numerous Walmart items on the Google Express, Google’s online marketplace and through the voice-controlled Google Assistant starting from September end. Google Express already offers products from a variety of stores, such as Target Corporation (TGT - Free Report) .

In April, Walmart introduced a program wherein it offered discounts on online items, only if shoppers picked their orders from a nearby store. The discount given had an added feature to Walmart’s already existing delivery service called Walmart Pickup, which enables customers to place orders online and then pick them up from a store for free.

Not only this, Walmart is trying every means to compete with brick-and-mortar rivals and e-Commerce king Amazon. In this regard, the company continues to make huge investments in e-Commerce initiatives, including acquisitions. The company has acquired four e-commerce businesses (Bonobos, ShoeBuy, Moosejaw, ModCloth) since the Jet.com acquisition (in September 2016) is in line with the Walmart’s expansion efforts. Recently, the company plans to invest in online cosmetics startup Birchbox. If the deal materializes, it will become the fifth e-commerce acquisition, since the buyout of Jet.com. The company is also expanding in Mexico and China to gain substantial market share in those regions.

If we look into the share price performance on a year-to-date basis, we note that Walmart’s shares have rallied 15.1%, higher than the industry, which grew 7.5%. The broader Retail-Wholesale sector has increased 17.9% on a year-to-date basis.

Our Take

As we can see, this Zacks Rank #3 (Hold) company is making huge investments in e-commerce activities. While growing e-commerce business is boosting the company’s sales, higher costs involved in it is pressuring margins. We remain encouraged by the company’s efforts to boost sales and regain investors’ confidence. However, it still faces many deterrents, which are likely to impact earnings in the near term. Declining international sales and currency headwinds are also expected to impact the results negatively.

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